Tax code changes may impact donations

December 7, 2011

ALPENA - The holidays are a time for giving and receiving. For the Community Foundation for Northeast Michigan, the hope is that both activities will continue on unscathed in 2012.

Beginning the first of the year, Michigan community foundation contributors will no longer experience tax code returns on their donations due to an elimination of the charitable tax credit implemented by Gov. Rick Snyder.

"I can't blame the legislators and I can't blame Gov. Snyder," Community Foundation for Northeast Michigan Executive Director Barbara Willyard said. "We have a mess to clean up, and this is one of the ways he saw to resolve the budget."

The changes in the tax code will not have as much of an impact on the community foundation's day-to-day operation as one might naturally think, though.

Willyard said she does not expect donation levels to fall more than 15 percent. As a result, the foundation will be forced to give out less money in funds and grants. However, with an upturn of a downtrodden economy and a rise in awareness, the foundation has the backbone to produce the constant results the Northeast Michigan community has become accustomed to.

The Community Foundation for Northeast Michigan gave out grants totaling $1,065,348 and $877,420 in gifts in its 2011 fiscal year.

"We've gotten to the point now where people know to trust us," Willyard said. "Hopefully donors will know that they can continue to meet all (the community's) needs through our community foundation."

Under current law, single donors can receive a 50 percent return on any endowment fund donation up to $200. Couples can contribute up to $400 and experience the same kickback, while businesses have a $10,000 or 5 percent of tax liability, whichever is less, cap to experience the 50 percent return.

"First of all, I don't think that there were a huge percentage of donors that cared about the tax credit," Willyard said. "It was just something they did on their tax return, and many of them may not have even been aware of it.

"So I don't think it is going to be a huge problem. I do think it is going to affect us, I just don't think it is going to affect us in a really large way."

The community foundation bases its availability for grants and other funding on a 12-quarter scale, meaning that a possible downturn in funds in the immediate future will not have the effect it would if they stood alone.

According to a non-scientific survey conducted in late 2010 by the Northeast Michigan Community Foundation, slightly over half of the 43 respondents stated that a reason for giving to the community foundation was because of tax purposes. Nearly 80 percent of those who replied stated that a reason for donating was to give back to the community.

Respondents were permitted to have multiple reasons for donating.

The tax code change will have a direct link to foundations such as Sunrise Mission, a homeless shelter, and the Alpena Regional Medical Center, both of which receive funding from the community foundation.

"It was helpful and people have cited (the tax return) when making donations" John Ritter, director of Sunrise Mission, said. "It's not a good thing to discourage the public sector from making donations."

He also said he is expecting Sunrise Mission to have less money to work with in the future.

Ann Diamond, development director at ARMC, said she expects donation levels to stay constant. However, she said those who will continue to donate may choose to do so directly to the hospital instead of going through the community foundation.

In many instances, donors split their donations between the direct fund, which goes to a development council and is used only for large capital projects, and an endowment via the community foundation, she said.

Diamond is very optimistic the hospital will continue to receive sufficient funds from the community foundation.

"I really don't see a dramatic change in funding at all," she said. "I think people that are passionate about giving will make the right decision."

Despite a less-than-perfect economic situation, the Community Foundation for Northeast Michigan has experienced a 32 percent growth increase since the turn of the century.

"I would say I feel very strongly that the community foundation is here for the long run," Diamond said. "They are very strong and well managed. Alpena is lucky to have a foundation like that."